UK property developers are growing more confident about the year ahead as borrowing conditions improve although most still face significant cost and planning pressures, research from Octane Capital reveals.
A survey commissioned by the specialist lender found that 67% of developers expect UK property market conditions to improve in 2026, following a period of stabilisation in the lending market after the Bank of England’s interest rate cut in December. Just under a third remain cautious.
More than a third of respondents (36%) said they are more likely to start or progress development and investment projects this year than in 2025, while a further 34% expect activity levels to remain broadly unchanged. Only 30% anticipate reducing activity.
Falling interest rates are seen as the main driver of any recovery, cited by 34% of developers, with improved lender confidence (24%) and increased availability of finance (14%) also playing an important role.
CHALLENGES AHEAD
However, the vast majority of developers — 82% — say they are still grappling with challenges. High build and labour costs were named as the biggest issue by 34%, followed by planning delays or uncertainty (20%) and funding delays (14%).
Exit risk, valuation gaps and limited flexibility from mainstream lenders also continue to restrict activity.
As a result, specialist finance is expected to remain central to development strategies. Nearly two thirds of developers (65%) said they plan to rely on specialist funding in 2026, with bridging finance the most popular option, followed by development and refurbishment finance.
STABILITY IS CRUCIAL
Jonathan Samuels (main picture, inset), Chief Executive of Octane Capital, says: “Developers are clearly drawing confidence from a stabilising lending environment, particularly with interest rates now moving in the right direction and now that Autumn Budget uncertainty has lifted.
“This stability is crucial, as it allows developers to plan with greater intent, however, confidence alone does not remove the underlying challenges faced.
“Build costs, planning delays, and funding constraints remain an issue, which is why specialist finance continues to play such an important role.
“Flexibility and speed are increasingly critical when navigating the market, and specialist lenders are well placed to support developers as they move projects forward in 2026, particularly where traditional funding routes remain constrained.”
